Retirement Plan Participation and Features, and the Standard of Living of Americans 55 or Older

This Issue Brief is the third in a series of Employee Benefit Research Institute (EBRI) publications based on the Retirement and Pension Plan Coverage Topical Module of the 1996 Survey of Income and Program Participation (SIPP), which includes data from 1998. This report completes the series by examining the survey's more detailed questions concerning workers' employment-based retirement plans. Specifically, it examines the percentage of workers who are participating in a plan and also workers' reasons for not participating in a plan when working in a job where a plan is sponsored; the features of, or decisions made concerning salary reduction plans; historical participation in employment-based retirement plans; and a comparison of the standard of living of individuals age 55 or older with their living standard in their early 50s.

As of June 1998, 64.3 percent of wage and salary workers age 16 or older worked for an employer or union that sponsored any type of retirement plan (defined contribution or defined benefit) for any of its employees or members (the "sponsorship rate"). Almost 47 percent of these wage and salary workers

participated in a plan (the "participation rate"), with 43.2 percent being entitled to a benefit or eligible to receive a lump-sum distribution from a plan if their job terminated at the time of survey (the "vested rate").

The predominant reason for choosing not to participate in a retirement plan was that doing so was unaffordable. The eligible participation rate for salary reduction plans was 81.4 percent.

Fifty-six percent of all workers have participated in some type of retirement plan sometime during their work life through 1998. For those ages 51-60, almost 72 percent have ever participated in a plan.

The median account balance in salary reduction plans in 1998 was $14,000. In 1998, 12.9 percent of salary reduction plan participants eligible to take a loan had done so, and the average outstanding loan balance was $5,196.

Nearly 80 percent of those age 55 or older reported that their standard of living is about the same or better now than it was when they were in their early 50s. The incidence of both pension income and health insurance from a former employer had a significant impact on retirees' ability to maintain their standard of living. In addition, those who spent their entire most recent lump-sum distribution were more likely to have a much worse standard of living in retirement than those who rolled over their entire most recent distribution.